United States: Recent Amendments To Federal Removal Statutes Create New Possibilities And Potential Pitfalls For Litigators

Litigators should be aware of recent noteworthy amendments to
the federal removal statutes. 28 U.S.C. §§ 1441, 1446.
The removal amendments, brought about by the Federal Courts
Jurisdiction and Venue Clarification Act of 2011, PL 112-63,
December 7, 2011, 125 Stat 758, apply to all actions
"commenced" in state court on or after January 6, 2012.
The first change resolves a circuit split over the time for removal
in a case involving multiple defendants, where each defendant is
not served at the same time. The second change strips federal
district courts of removal jurisdiction they previously possessed
over state law claims not within the court's original or
supplemental jurisdiction. These changes present litigators with
significant tactical choices and opportunities.

Adopting the "Later-Served Defendant" Rule
for Removal

Under the Act, when multiple defendants are sued in state court,
each defendant now has 30 days to file a notice of removal
to federal district court, starting from the date that the
defendant itself was served, not from the date the first
defendant was served. Before the Act, there was a deep circuit
split between circuits adopting this so-called
"later-served" rule and those adopting the
"first-served" rule, which required any defendant seeking
removal to file the notice of removal within 30 days of the date
the first defendant is served. Compare Delalla v.
Hanover Ins., 660 F.3d 180, 182 (3d Cir. 2011) (adopting
"later-served" rule) with Barbour v. Int'l
Union, 640 F.3d 599, 610 (4th Cir. 2011) (adopting
"first-served" rule).

Defendants seeking removal to federal court under 28 U.S.C.
§ 1441 must do so according to the procedures in 28 U.S.C.
§ 1446. Prior to the amendment, Section 1446(a) required a
"defendant or defendants desiring to remove" an action to
file a notice of removal. Old Section 1446(b) provided that a
notice of removal "shall be filed within thirty days after the
receipt by the defendant, through service or otherwise, of a copy
of the initial pleading ... or within thirty days after the service
of summons upon the defendant if such initial pleading has then
been filed in court and is not required to be served on the
defendant, whichever period is shorter." Because Section
1446(a) referred to a "defendant or defendants," but
Section 1446(b) referred only to "receipt by the
defendant," the prior version raised the question of whose
receipt of the complaint triggered the 30-day clock for removal,
the first defendant or any defendant.

The new Section 1446 specifies that "[e]ach defendant shall
have 30 days after receipt by or service on that defendant
of the initial pleading or summons ... to file the notice of
removal." 28 U.S.C. § 1446(b)(2)(B) (2012) (emphasis
added). Thus, the new version resolves the circuit split over the
time for removal in multiple defendant cases and clears up any
ambiguity over the applicable rule: a new 30-day period begins when
each defendant receives the complaint. It also eliminates the
potentially "perverse incentive system" created by the
first-served rule, which encouraged a "plaintiff who wishes to
remain in state court [to serve] a defendant who is indifferent to
removal, and then [to wait] to serve other defendants who are more
likely to wish to remove." Delalla, 660 F.3d at
186.

Beyond these changes, the new Section 1446 also codifies the
judicially created "rule of unanimity" by providing that
"all defendants who have been properly joined and served must
join in or consent to the removal of the action." 28 U.S.C.
§ 1446(b)(2)(A) (2012); see also City of Cleveland v.
Ameriquest Mort. Securities, Inc., 615 F.3d 496, 501 (6th Cir.
2010) (describing the judicially created "rule of
unanimity"). And, anticipating that later-served defendants
may seek to remove even if an earlier-served defendant has chosen
not to, the new Section 1446 states that if "defendants are
served at different times, and a later-served defendant files a
notice of removal, any earlier-served defendant may consent to the
removal even though that earlier-served defendant did not
previously initiate or consent to removal." 28 U.S.C. §
1446(b)(2)(C) (2012).

Stripping Federal Courts of Jurisdiction Over Unrelated
State Law Claims

The Act implements another important change in the removal
statutes: a federal district court no longer has discretion to hear
state law claims in a removed action if they are not otherwise
within the original or supplemental jurisdiction of the court.
Section 1441(c) now provides that when a state court case includes
a removable federal claim and "a claim not within the original
or supplemental jurisdiction of the district court or a claim that
has been made nonremovable by statute," a defendant can still
remove "the entire action ... if the action would be removable
without the inclusion of the [nonremovable] claim." However,
after such a case is removed, the federal district court must sever
the nonremovable claims from the action and "shall
remand the severed claims to the State court from which the action
was removed." 28 U.S.C. § 1441(c) (emphasis added).

The old Section 1441(c) likewise provided that when a removable
"claim or cause of action ... is joined with one or more
otherwise non-removable claims or causes of action, the entire case
may be removed." But unlike the amended version, the old
Section 1441(c) allowed district courts to decide all the claims
or, "in its discretion, [to] remand all matters in which State
law predominates." As a result, the old version permitted
federal district courts to decide state law claims over which they
lacked jurisdiction.

This generated criticism from courts and commentators who
believed that by extending federal removal jurisdiction over state
law claims not within the federal court's jurisdiction, the old
Section 1441(c) exceeded the boundaries of Article III
jurisdiction. Thomas v. Shelton, 740 F.2d 478, 483 (7th
Cir. 1984) (Posner, C.J.) (noting the "constitutional
questions" raised by the exercise of removal jurisdiction over
state law claims "completely unrelated to any claim within the
federal district courts' original jurisdiction" and, thus,
outside of Article III jurisdiction); Douglas D. McFarland, The
Unconstitutional Stub Of Section 1441(c), 54 Ohio St. L. J.
1059 (1993) (same). It was this criticism that prompted Congress to
amend Section 1441(c) and preclude federal courts from adjudicating
such "separate and independent" state law claims. H.R.
Rep. No. 112-10, at 12 (2011) (stating that new Section
1441(c)'s "sever-and-remand approach is intended to cure
any constitutional problems").

Therefore, under the new Section 1441(c), state court litigants
contemplating removal of an action involving state law claims
potentially outside of federal jurisdiction must consider the
possibility that if they remove, the state law claims will be
remanded and they will face litigation in both state and federal
court.

Conclusion

The recently effective amendments to the removal statutes
brought about by the Federal Courts Jurisdiction and Venue
Clarification Act of 2011 resolve a circuit split, cure potential
inequities, clarify various aspects of removal procedure and
jurisdiction, and avoid a lurking constitutional problem. Litigants
need to be aware of the changes because they can determine where a
case will be heard and how and when a state court action can be
removed to federal court. The Act also amended the procedures for
establishing the amount in controversy for purposes of removal
based on diversity jurisdiction, which will be the topic of a later
article.

This article is presented for informational purposes only
and is not intended to constitute legal advice.

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Several interrelated legal developments make it more important than ever for religious institutions intending to qualify for exemptions to generally applicable laws to do the hard work before litigation or administrative inquiry of considering what their religious beliefs mean for their governance structure, employment relations and delivery of services.

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